Positive signs in a challenged Europe

The Europe, Middle East, & Africa (EMEA) region put on an impressive dealmaking display in 2022, against the prevailing odds. Although the invasion of Ukraine by Russia has had a bigger impact on Europe than any other region, EMEA M&A activity has held up well. Value trended down in the final months of the year, but volume remained comfortably above pre-pandemic levels as the focus shifted toward smaller and strategic transactions.

Europe, long dependent on Russian energy imports, had an unexpectedly warm November and December, which meant demand was not as high as feared. Remarkably, energy has fallen back to pre-conflict prices and has brought inflation down with it.

While still too high in monetary policymakers’ eyes, the Harmonised Index of Consumer Prices topped out at 10.6% across the euro area in October and by December had fallen to 9.2%. This is a promising development. The Euro Stoxx50 also rallied more than 25% from its October low through the end of January 2023.

Commodity boom

The Middle East and Africa have continued to benefit from the elevated price of crude oil. Like energy prices, the commodity peaked mid-year and turned down through much of H2 to end the year where it began. Nevertheless, oil prices are still well above those recorded in the years preceding the COVID crisis, and this has helped maintain high spirits in the Middle Eastern M&A market especially.

The real question now is where Europe’s economy is headed. The fog of war has not lifted, and the International Monetary Fund expects half of the EU to enter recession in the near term. Governments are supporting Ukraine as the conflict rages on, and inflation is still high enough to inhibit consumption and demand. Investors will be treading carefully. But all things considered, it is hard to dismiss EMEA’s resilience up to now.

Published in association with Datasite, Deal Drivers Americas provides an in-depth review of M&A activity in 2022, as well as a look ahead to 2023.

The report is also available on datasite.com.